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Clustering Companies Listed on the Warsaw Stock Exchange According to Time-Varying Beta

Author

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  • Szczepocki Piotr

    (University of Lodz, Lodz, Poland)

Abstract

The beta parameter is a popular tool for the evaluation of portfolio performance. The Sharpe single-index model is a simple regression model in which the stock’s returns are regressed against the returns of a broader index. The beta parameter is a measure of the strength of this relation. Extensive recent research has proved that the beta is not constant in time and should be modelled as a time-variant coefficient. One of the most popular methods of the estimation of a time-varying beta is the Kalman filter. As the output of the Kalman filter, one obtains a sequence of the estimates of a time-varying beta. This sequence shows the historical dynamics of sensitivity of a company’s returns to the variations of market returns. The article proposes a method of clustering companies listed on the Warsaw Stock Exchange according to time-varying betas.

Suggested Citation

  • Szczepocki Piotr, 2019. "Clustering Companies Listed on the Warsaw Stock Exchange According to Time-Varying Beta," Econometrics. Advances in Applied Data Analysis, Sciendo, vol. 23(2), pages 63-79, June.
    • Handle: RePEc:vrs:eaiada:v:23:y:2019:i:2:p:63-79:n:5
    DOI: 10.15611/eada.2019.2.05
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    References listed on IDEAS

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    Cited by:

    1. Tashreef Muhammad & Tahsin Aziz & Mohammad Shafiul Alam, 2023. "Utilizing Technical Data to Discover Similar Companies in Dhaka Stock Exchange," Papers 2301.04455, arXiv.org.

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    More about this item

    Keywords

    time series clustering; cluster analysis; time-varying beta;
    All these keywords.

    JEL classification:

    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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